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The Indian stock market experienced a significant downturn on September 6, with the Nifty 50 index closing below the crucial 25,000 support level. This sharp decline, coupled with above-average trading volumes, suggests a potential shift in the short-term trend from bullish to bearish. The Nifty 50 lost 293 points, or 1.17 percent, to settle at 24,852, marking the largest single-day drop since August 5. This bearish sentiment is confirmed by the formation of a long bearish candlestick pattern on the daily charts, with the index closing below both the 10- and 20-day Exponential Moving Averages (EMAs). The momentum indicators RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) also exhibit negative crossovers, further reinforcing the bearish outlook.
The Bank Nifty index mirrored the Nifty 50's downward trajectory, experiencing a significant decline of 896 points, or 1.74 percent, to end the day at 50,577. This represents a steep fall, with the index closing not only below the mid-point of the Bollinger Band but also below the crucial 10, 20, and 50-day EMAs. Similar to the Nifty 50, the Bank Nifty also formed a long bearish candle on the daily charts. The RSI indicator also displays a negative crossover, pointing towards a short-term bearish trend. Furthermore, Fibonacci retracement levels suggest resistance at 51,071 and 51,515, while support levels are identified at 50,087 and 49,628.
An analysis of weekly options data provides insights into potential resistance and support levels for both the Nifty 50 and Bank Nifty. For the Nifty 50, the 26,000 strike holds the maximum open interest, indicating a significant resistance level in the near term. This is followed by the 25,200 and 25,000 strikes. On the other hand, the 24,000 strike exhibits the maximum open interest for Put options, highlighting a potential support level. The Bank Nifty options data shows that the 51,500 strike has the highest open interest, signifying a key resistance level for the index. The 50,000 strike, meanwhile, holds the maximum open interest for Put options, suggesting potential support.
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